New UPI charges: Will you have to pay extra fees for payments to what changes for vendors, all FAQs answered

UPI payments are getting a new set of rules, under which a new Merchant Discount Rate (MDR) will apply to certain transactions. However, this does not mean that people will have to pay extra every time they use UPI. The government has clarified that all person-to-person payments will remain free, no matter how much money is transferred. Payments made to merchants up to Rs 2,000 will also continue to have zero MDR. The new charges will apply only to certain merchant payments. Small merchants will also remain protected under the zero-MDR system. Here is a closer look at what the new UPI rules mean for customers and businesses.

Will you have to pay a fee for sending money to another person?

No. Person-to-person UPI payments will remain free, no matter how much money is transferred. You will not be charged a transaction fee, platform fee or any other direct charge for these payments.

Will UPI payments to shops under Rs 2,000 remain free?

Yes. Merchant payments of up to Rs 2,000 will continue to have zero MDR. This means you will not have to pay an extra fee when paying a shop, restaurant or other business through UPI.

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What happens when a UPI payment is above Rs 2,000?

A 0.4 per cent MDR may apply to specified merchant transactions above Rs 2,000. For transactions of Rs 75,000 or more, the MDR will be capped at Rs 300.

Will customers have to pay MDR?

No. MDR is not a customer fee. Banks have been advised to ensure that merchants do not pass this cost to customers. UPI apps are also not allowed to add separate platform fees or hidden charges.

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What does this mean for small vendors?

Small merchants such as street vendors and small shops will continue to get zero MDR on eligible transactions. Merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category will remain covered by this protection.

Are all merchant transactions going to attract charges?

No. The government estimates that around 96 per cent of merchant transactions will remain unaffected. MDR will apply to only about 4 per cent of merchant transactions.

Are there different MDR rates for some sectors?

Yes. Transactions above Rs 2,000 in sectors such as railways, telecom, insurance, fuel and agricultural inputs will attract a flat Rs 5 MDR. Payments linked to mutual funds, securities, stockbrokers and dealers will have an MDR of 0.02 per cent, capped at Rs 300.

Why has the government introduced these rules?

The new framework is aimed at making the UPI ecosystem financially sustainable while keeping everyday payments free. “A dedicated fund will be established to promote UPI adoption among small merchants. An amount equivalent to 5 per cent of total MDR collections will be contributed to this fund,” the government claims. “The fund will support wider UPI acceptance, sustained usage and the inclusion of small businesses in India’s digital payments ecosystem.”